New Mexico pension fund invests in First Reserve energy fund

New Mexico State Investment Council (NMSIC) has announced an investment of $100 million in the energy private equity fund First Reserve Energy Infrastructure Fund II, L.P..

The Townsend Group is recommending the pension fund to invest in the fund managed by First Reserve, an employee-owned private equity firm founded in 1983, which also sponsors a fund series that follows a buyout investment strategy in the global energy sector.

First Reserve II is targeting a return commensurate with the strategy and risk profile, including a strong annual cash yield component by investing in four energy sectors:

• Contracted Power, including conventional generation and renewable power;
• Contracted Midstream, including pipelines, storage and liquefied natural gas (LNG) facilities;
• Contracted Energy Assets, including floating storage facilities and large scale equipment; and
• Regulated Transmission and Distribution, including electric transmission and utilities

To date, First Reserve has raised over $26 billion in commitments from investors and deployed over $20 billion through its funds and related partnerships.

In September 2013, MSIC approved a 5% interim target allocation for real return strategies, whereas the long term target allocation for  the real return portfolio is 10% of the funds’ assets.

Real assets are currently planned to be 60% of the real return allocation, or ultimately 6% of the funds’ assets. Real assets include energy, infrastructure, timberland and commodities.

After this investment, NMSIC has invested $400 million in energy assets and $365 million in infrastructure assets. NMSIC has invested in other infrastructure funds such as Global Infrastructure partners (GIP) II, Brookfield Infrastructure Fund II and IFM Global Infrastructure Fund.